The ethical challenges facing in-house lawyers, and how to address them – the beginnings of a new conversation with our in-house solicitor members

Just days after the SRA published its report on the findings of its thematic review of the challenges facing in-house solicitors (SRA | In-house solicitors thematic review | Solicitors Regulation Authority), The City of London Solicitors’ Company (the “Company”) hosted a discussion on ethics and regulation for the in-house lawyer at the offices of Freshfields Bruckhaus Deringer.?On 20 April 2023, Jonathan Kembery (Freshfields’ GC) brought together a formidable panel of experts - Marianne Butler of Fountain Court Chambers , Karen Nokes of UCL and Jenifer Swallow , a consultant and strategic adviser with considerable in-house experience - to consider whether and how best in-house lawyers (who are solicitors in England and Wales) can be the “conscience of their corporation”.

This note is no substitute for having been at the event itself and hearing everything our experts had to say on the night, but we thought that sharing some of the key points made would be an interesting read for anyone wishing to learn more on the topic and unable to attend.

It was acknowledged that dealing with dominant clients with pressing commercial agendas was not unique to the in-house sector.?Solicitors working in private practice also face this pressure, and, like in-house lawyers, do not wish to be thought of as saying “no” without offering a workable solution to help to achieve the client’s objective.?The risk of a private practitioner losing an important client for their law firm can create personal pressures which are similar to those faced by in-house lawyers.?Each may feel that it could be their job which is ultimately at risk.?

Whilst dealing with ethically tricky situations is not an everyday experience for most in-house lawyers, the stakes can be high when these situations do arise.?The skill, in such situations, is to avoid an outcome which involves the in-house lawyer’s advice being ignored, with the risks that this can pose for the corporate employer and its wider stakeholders as well as for the in-house lawyer themself.?

As to how to go about achieving a culture, in a non-SRA regulated corporate, which favours compliance with SRA rules by its in-house legal team, our panel noted:

·????????An in-house lawyer cannot (even if they might wish to) ignore their ethical obligations, as set out in the SRA’s Principles and Code of Conduct, as these have statutory authority; they are delegated legislation.?Further, if any of the SRA’s Principles conflict in any given situation, the SRA takes the view that it is the outward-facing Principles which would take precedence over and above acting in the bests interest of the client.?In the Introduction to its Principles, the SRA says this: “Should the Principles come into conflict, those which safeguard the wider public interest (such as the rule of law, and public confidence in a trustworthy solicitors' profession and a safe and effective market for regulated legal services) take precedence over an individual client's interests”.?In this sense, the SRA’s Principles, just seven in number, have the potential to be used, if needed, as a “paper sword” by in-house lawyers to defend their advice and stance.?It was, however, acknowledged that, in the absence of further supporting internal policies/procedures and/or governance controls within their employer organisation, the practical reality of using the Principles in this way may be hard for an in-house lawyer.

·????????That said, those seven Principles do not set out ethical ideals which are unique to the in-house lawyer.?They are similar to the standards expected of a corporate’s directors and so there should be no real scope for tension between a corporate’s in-house advisers and its board.?Having direct access to the board might therefore be something which in-house lawyers should expressly reserve in the terms of their employment, as often they will take their instructions, on a day-to-day basis, from commercial colleagues who are not also directors of their employer.

·????????Indeed, determining who the client is, whenever asked to advise, was key to compliance.?In the panel’s experience, if this questioned is asked and answered correctly at the outset, good compliance tends to flow more naturally.?An in-house lawyer can act not just for their actual employer but related parties too, such as other group companies.?Identifying with certainty who the client is, and whether there is more than one, when asked to advise, helps the in-house lawyer to identify and appropriately deal with any conflict, confidentiality and disclosure-related issues and obligations.

·????????Issues can also arise if in-house lawyers treat their business colleagues as clients rather than working with the clarity that ordinarily it is the corporate entity, represented by their board, who is the client. This can lead to inadvertent breach of regulatory duties. ?

·????????In private practice, the discipline of opening client/matter records and sending of engagement letters tends to keep the client identification issue front of mind. Might this be replicated in some way in larger in-house teams especially? Having “onboarding” policies and procedures in-house would also prompt clarity as to which individuals are authorised to give the in-house lawyer their instructions, as well as giving the in-house lawyer the opportunity to remind/inform both the client and the individual giving them their instructions what the in-house lawyer’s regulatory obligations are. ?

·????????A particular bear trap for the unwary here is the risk of taking “incremental instructions” on a matter – that is, instructions from a number of people as opposed to a single contact.?In-house lawyers, like all solicitors, have disclosure obligations which require them to share all relevant confidential information pertinent to a matter with their client; there is a risk of breaching this duty where there are multiple colleagues purporting to give the in-house lawyer instructions on a matter, as the lawyer will likely share some information with each of them but is unlikely to share all information with all or even one of them.

·????????This danger is, of course, very closely connected with the “identification of client” point.?In some circumstances, sharing material information about a matter with a business colleague lead, who is not also a director of the client, and failing to share that information with the corporate client’s board too can put in-house lawyers at risk of breaching their disclosure duties.

·????????Along with a “professional identity”, lawyers can also have an “organisational identity”.?Being cognisant of one’s “organisational identity” in any particular context can help.?If an in-house lawyer is not sure whether they are involved in a matter as adviser, observer or technician, this can lead to what is sometimes called “cognitive conflict” with one’s professional identity.?An in-house lawyer must know what hat they are wearing in order that they are live to which values and obligations should dominate.

·????????Good people occasionally do bad things and it is rarely because they intend to – it is likely that failure to identify a decision is being an ethical one plays a big part here.

·????????Identifying a decision as an ethical one means that an in-house lawyer is more likely to seek a second opinion from another member of the in-house legal team.?Normalising discussions around scenarios and sense-checking decision-making should be encouraged. ?

·????????Adopting a position whereby all in-house lawyers in an organisation’s legal team are expected to call out anything “slightly off” at the outset could also have benefits by helping to set the tone and potentially heading off bigger problems. Otherwise a “boiling frogs” scenario can present itself – whereby the lawyer fails to take into account or realise the cumulative effect of the small things.?

·????????More broadly, minor infractions are easier to ingest and can result in self-justifying a “yes”.?Overtime, this can become routinised, side-stepping reflective practice.?It is OK to say “I need to think” and “I’ll have to come back to you”.?Reflection and reversion can prevent the risk of falling into an “ethical sinkhole”.

·????????Dedicated ethics training was vital and for some in-house legal teams this might mean increasing their existing offering or making it more focussed.?The value of this (and additional budget needed to deliver ethical training programmes) should not be lost on the client/employer given that barristers are seeing an increase in the number of in-house lawyers taking personal advice on their regulatory duties – a reaction in part to the increased reporting duties they now have.?Further, corporate responsibility is increasingly on the board agenda (e.g. through the lens of ESG), and the role of in-house lawyers (in the context of allegations of corporate misconduct) increasingly under the spotlight.

·????????In private practice, the rigour which being the law firm COLP involves (not just the reporting obligations the role carries, but the obligations to make sure your organisation has good policies and procedures to ensure compliance backed by appropriate training) can inform the way a law firm GC approaches their job.?Could this idea be carried over into the in-house context by the regulator??And might this be something which the in-house community would welcome, rather than viewing as an additional regulatory burden?

The COLP question is where our formal conversation had to end (although further discussion followed over drinks) on this occasion.?The evening felt very much like the beginning of an important conversation, which many feel needs to continue as matter of some urgency, involving both corporate employers of in-house lawyers and regulators too.

If you’d like to attend our “Food for Thought” events going forward, please do let our Clerk, Linzi James , know.?We should mention that, although these events are open to non-members, members of the Company do get priority. If you are interested in learning more about what membership involves and the other benefits it can bring you, please do get in touch.?We’d be delighted to hear from you.

Finally, a huge thanks to our fabulous panel of experts for making this event such an enjoyable and stimulating one, and to Jonathan and Freshfields for their kind hospitality.

Sarah de Gay , Senior Warden, 26.4.23

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